- The Big Mac Index compares the buying power of currencies around the globe
- However, the index has illustrated the grim reality of how weak the rand truly is
- The latest statistics have found the currency is undervalued by 62% against the dollar
South Africa is undeniably in the grips of difficult economic times and the world is taking notice.
Business Insider reports that the Big Mac Index, which compares the buying power of international currencies, has undervalued the rand by 62% against the dollar.
This makes South African coin the most underpriced major currency in the world. The rand is worse off than both the Russian rouble and the Turkish lira. Both are currently undervalued by 61%.
The index is based on the theory of purchasing-power parity, saying that in the long run currencies should adjust so that a product would cost the same internationally.
The Economist reports that the Big Mac index has become a global standard, used in classrooms and economic books.
Only a few countries, including Switzerland, managed to stay firm against the dollar, with Australia and Britain joining the ranks of the undervalued, Briefly.co.za gathered.
Just a few years ago, 2009 to be exact, the rand was strong at R8.28 to the dollar, with the same index finding it was undervalued by 39% against the American currency.
However, the rand has since nosedived, trading at around R14.40 against the dollar.
But there seems to still be some hope according to reports, with experts noting that currencies deemed undervalued bounce back after 10 years.
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